New Democracy coalition negotiations will not be straightforward

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As expected, New Democracy has ‘won’ the Greek election, becoming the biggest party in the new parliament. Now they must try to form a working coalition government, says Barry Norris (pictured), partner at European fund management boutique, Argonaut Capital Partners…

The only credible partner for New Democracy is PASOK, which previously indicated it would only join a government of national unity, including Syriza. With Syriza likely to believe it can strengthen its position further in opposition, forming a working coalition will not be straightforward. Assuming New Democracy can form a government, negotiations will start with the EU on easing the terms of the bailout, for which there will be some sympathy amongst other Eurozone leaders.

However, whatever deal New Democracy are able to make will be denounced by Syriza. There is also a sense in which this result will relieve near term pressure on EU policy makers and central banks for a more radical response to the crisis.

After initial relief, markets are likely to remain in wait-and-see mode and are likely to realise this Greek election result is unlikely to be a significant turning point. Southern Europe and Eurozone banks remain too risky. Blue-chips with strong balance sheets, superior business models and attractive dividends remain the stand-out investment in financial markets.